Stock investing can generate significant return on investment. You must report your profit from the sale of stock. Profit is the amount that you earned on your investment. It does not include the amount of your original investment. That amount, known as the tax basis, is not taxed. You calculate the basis when you sell the stock. You can calculate the tax basis for stock that you have held by following a few basis steps.

1. Determine how you gained ownership of the stock. Typically, you purchase stocks, but you also can inherit stock. Different rules apply for figuring the tax basis for stock that is inherited.

2. Determine the price per share that you paid or the value per share if you inherited the stock. The value is based on the what the stock sold for on the day that you inherited it.

3. Determine the number of shares purchased for each date that you purchased shares of a particular stock.

4. Multiply the purchase price per share of stock bought on a certain date by the number of shares purchased on that date.

5. Determine the amount of broker commissions you paid when you purchased your stock.

6. Add the commission to the price you paid for your stock. This figure represents your total cost.

7. Divide the total cost by the number of shares purchased. The result is the cost basis, or tax basis, per share.

#### Tips

- Several websites allow you to enter the name of the stock and the date of purchase, and the sites automatically provide the average price of the stock for that day.
- Brokers can help you track down the cost of your stock on the purchase date and the commissions paid.
- Subtract the cost basis from the sell price to determine how much profit you earned per share. Multiply the profit per share by the number of shares to calculate your total profit.

#### Warnings

- If you purchased shares of the same stock on different days and the price paid was not identical, you must calculate the cost basis separately for each date.
- You must report your profit as capital gains income.

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